SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 41285 \ April 14, 1999 Admin. Proc. File No. 3-9609 __________________________________________________ : In the Matter of the Application of : : JON G. SYMON : J.G. SYMON & COMPANIES : 101 West 11th Street, Suite 1200 : Kansas City, Missouri 64105 : : For Review of Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.: _________________________________________________: OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION -- REVIEW OF ASSOCIATION ACTION DENYING WAIVER OF EXAMINATION REQUIREMENTS Registered securities association denied the request of a former registered securities principal, whose registrations as a general securities principal and a financial and operations principal had lapsed, to resume those licenses without requalifying by examination. Held, appeal proceedings dismissed. APPEARANCES: Jon G. Symon, pro se. Alden S. Adkins and Gary L. Goldsholle, for NASD Regulation, Inc. Appeal Filed: May 22, 1998 Last Brief Received: October 7, 1998 I. Jon G. Symon, a former registered representative with D. E. Frey & Company, Inc. ("D. E. Frey"), a member of the National Association of Securities Dealers, Inc. ("NASD"), seeks review of an April 1, 1998 ruling by the NASD's National Adjudicatory Council ("NAC"). The NASD denied Symon a waiver from the requirement in the NASD's Membership and Registration Rule 1021(c) [/] that he pass the appropriate qualification examinations for the principal capacities in which he sought to become associated. We base our findings on an independent review of the record. II. Symon is the president and owner of Braveheart, L.L.C. ("Braveheart"), a broker-dealer that applied for NASD membership in July 1997. In Braveheart's application, Symon proposed that he would act as Braveheart's general securities principal ("principal") and as a limited principal--financial and operations ("FINOP"). Although Symon had been previously registered both as a principal and a FINOP while associated with another member firm, CKS Securities, Inc., those registrations terminated in August 1994. Pursuant to NASD Membership and Registration Rule 1021(c), Symon had two years from the date of termination to reinstate his principal and FINOP registrations without being required to retake the Series 24 and 27 examinations. Symon was associated with D. E. Frey from November 1994 to July 1995. Frey applied to have Symon's registration as a general securities representative transferred, but did not seek to transfer his principal or FINOP registrations. During August 1996, the applicable two-year period for the reinstatement of Symon's registrations as a principal and FINOP expired without their reactivation. The NASD "terminated" Braveheart's application after determining that Symon lacked the registrations of a principal or FINOP and finding that Braveheart did not have any other qualified principals. Absent a waiver, Symon could reinstate his principal and FINOP registrations only by re-taking the Series 24 and 27 license examinations. On September 25, 1997, Symon requested a waiver of re-examination pursuant to NASD Rule 1070(e), [/] contending that D. E. Frey failed to transfer his principal and FINOP registrations from his previous firm. Attached to his request was a letter from Kathryn Dominick, Co-Director of Compliance at D. E. Frey, stating: It is now our understanding that Mr. Symon also held the Series 24 and 27 licenses at his prior firm and D. E. Frey & Company would have transferred all such licenses but for our inadvertence. Therefore, Mr. Symon should have had these licenses in effect while at D. E. Frey & Company. Therefore, we respectfully request that his Series 24 and 27 licenses be reinstated. The NASD Regulation staff contacted Dominick requesting that the firm state whether Symon in fact had functioned as a principal and as a FINOP at D. E. Frey. Dominick declined to provide this representation, and on October 21, 1997, NASD Regulation staff issued Symon a letter denying his request for an examination waiver. [/] In a second letter to Symon, dated November 13, 1997, the staff noted that Dominick's letter conflicted with the "registration documents" that Symon had executed indicating that his duties with D. E. Frey would require a registration only as a representative, not as a principal. The staff, however, offered to reconsider the matter if Symon could provide a letter from a D. E. Frey principal attesting that Symon was associated with the firm in a capacity requiring the principal and FINOP registrations. The staff also required that D. E. Frey specify Symon's principal duties at D. E. Frey and the period during which Symon performed those duties. Symon refused to make any additional submissions in support of his waiver request. Instead, he contended that Dominick’s letter made clear that D. E. Frey's inadvertence had prevented the transfer of his licenses, and that this contention provided a sufficient basis to grant the exemption. On November 18, 1997, Symon appealed the NASD Regulation staff's decision to the NAC. In response to a new inquiry from the staff about Symon's duties at D. E. Frey, Dominick stated that "Mr. Symon was not assigned any supervisory functions during his affiliation with D. E. Frey & Company, Inc." Dominick also stated that Symon "was never responsible for the preparation of D. E. Frey & Company, Inc.'s financial records or financial reporting requirements." Before the NAC, Dominick also submitted, among other things, a new account form submitted by Symon and signed by Symon's supervisor, commission processing forms also signed by Symon's supervisor, and organizational charts showing that Symon was a registered representative and did not hold a supervisory position. Symon provided no additional information to support his request for an examination waiver. Symon instead argued that Dominick's original letter demonstrated that the lapse in his registrations was caused by D. E. Frey's inadvertence and, thus, his waiver request should be granted. [/] Symon, however, stated: "that "D. E. Frey & Co., Inc. fully believed that [I] acted in the capacity of a General Principal, if not a FINOP." Based upon its review of the record, the NAC denied Symon's request for an examination waiver. Symon now seeks review of the NAC's denial of his waiver request. III. As a threshold matter, the NASD questions whether we have jurisdiction over the appeal. Our authority to review NASD actions is governed by the Securities Exchange Act of 1934. [/] Exchange Act Section 19(d)(1) authorizes Commission review of an action of a self-regulatory organization ("SRO"), including the NASD, that imposes a final disciplinary action on a person associated with a member; denies membership to any applicant; prohibits or limits access to services offered by the organization or any of its members to any person; or bars any person from associating with a member. [/] Denial of Symon's request for a waiver of the Series 24 and 27 qualifying examinations is clearly not a final disciplinary action nor a prohibition or limitation of access to services. [/] The NASD did not find Symon engaged in any violation or impose a sanction, nor did the NASD deny him access to services. We also reject Symon's argument that the denial of his waiver request constitutes a denial of Braveheart's membership. The denial of Symon's request for an examination waiver and the denial of membership to Braveheart occurred in two separate proceedings. Braveheart did not appeal from the denial of its membership. Moreover, although the NASD noted that Symon was not qualified to be a principal or a FINOP at Braveheart, the NASD ultimately terminated Braveheart's application because Braveheart could not demonstrate that any qualified principal or FINOP was associated with the firm. We find, however, that the NASD's action constituted a bar against Symon from associating as a principal with any NASD member. In Frank R. Rubba, we reviewed the NASD's denial of an applicant's request for waiver from taking the registered representative examination and concluded that the NASD's action effectively barred Rubba from associating with any NASD member until he requalified for registration by taking the Series 7 examination. [/] We find here that the NASD's denial has effectively barred Symon from associating with any NASD member in a supervisory capacity until he satisfies the principal and FINOP examination requirements. We do not find persuasive the NASD's argument that Symon is not barred because he can still associate with an NASD member as a registered representative. Allowing association in another capacity does not diminish the fact that Symon has been denied association as a FINOP or a principal. The language of Section 19(d)(1) is not limited to a bar in all capacities from association with a member. [/] Section 19(d)(1) requires as a predicate to our review that the self-regulatory organizations impose a bar from association. We believe that this language encompasses a bar from association in specific capacities. We, therefore, determine that we have the jurisdiction to review the NASD's denial of an examination waiver to Symon. [/] IV. Pursuant to Section 19(f) of the Exchange Act, we review the NASD's action to determine whether: 1) the specific grounds on which the bar is based exist in fact; 2) the bar is in accordance with the rules of the NASD; and 3) the rules of the NASD are and were applied in a manner consistent with the purposes of the Act. If we do not make any of those findings, or if we find that the NASD's action imposes a burden on competition not necessary or appropriate in furtherance of the purposes of the Act, we must set aside the NASD's action and require the NASD to allow Symon to become associated. [/] NASD Membership and Registration Rule 1070(e) provides that the NASD may "in exceptional cases and where good cause is shown" waive the applicable examination requirements. The NASD has stated that it grants relief from the re-examination requirements to individuals where a firm, acting in good faith, has failed to file the appropriate application forms. The NASD considers this relief to be a correction of its records, rather than a waiver. Symon again asserts to us that he qualifies for a waiver because D. E. Frey erroneously failed to transfer his registrations as a principal and FINOP when he was engaged in supervisory acts while at D. E. Frey that required him to hold those licenses. Symon continues to rely upon Dominick's initial letter requesting reinstatement of Symon's principal and FINOP registrations because the firm had inadvertently failed to request transfer of those registrations. We find unpersuasive both Symon's assertions and the evidence upon which he relies. Under NASD Membership and Registration Rule 1021(a), a member firm is not permitted to maintain a principal registration for a person not functioning as a principal or where the sole purpose is to avoid examination requirements. While Dominick's initial letter stated that Symon's principal and FINOP registrations should have been transferred, D. E. Frey subsequently admitted to the NASD that Symon held no supervisory duties while he was associated with the firm. D. E. Frey, moreover, submitted records, including documents signed by Symon and employee organizational charts, demonstrating that Symon held no positions and performed no duties requiring those licenses. While Symon claims that D. E. Frey is not being candid about his duties, Symon never adduced evidence demonstrating his association with D. E. Frey in a capacity requiring principal and FINOP registrations. Symon also contends that the NASD overlooked other evidence which, combined with D. E. Frey's alleged failures, entitled him to either a full or a conditional waiver. Symon points to his thirty-one years of experience in the securities industry, his unblemished disciplinary history, his responsibilities in the area of investment management, and his current age of 63 as other evidence of his qualification for registration as a principal and FINOP without examinations. The NASD previously has stated that it grants two types of waivers. [/] The first type is an unconditional waiver where a registration category is granted without any further requirements. The NASD sometimes grants such waivers to individuals with substantial securities experience who have also qualified as Chartered Financial Analysts after completing a program focusing on the industry practice and regulation of research analysts and investment managers. The NASD will also occasionally grant unconditional waivers to persons with extensive experience in securities regulation with a state or federal agency or a self-regulatory organization or to major public figures whose registrations have been terminated for more than two years and who are returning to the private sector. [/] The NASD Regulation staff may consider certain factors in deciding whether an unconditional waiver should be granted. Those factors include: 1) length and quality of experience; 2) age and physical condition; 3) registration requested and type of business the person will engage in; 4) previous registration history; 5) absence of disciplinary actions; and 6) other qualification examinations that are suitable substitutes for the normal industry qualification requirements. [/] However, NASD Membership and Registration Rule 1070(e) makes clear that "[a]dvanced age, physical infirmity or experience in fields ancillary to the investment banking or securities business will not individually of themselves constitute sufficient grounds to waive a[n] . . . [e]xamination." [/] The NASD rarely grants unconditional waivers. The second type of waiver, which is more common, is a conditional waiver. A conditional waiver is based upon a person demonstrating substantial investment-related experience before becoming associated with a member firm. [/] Usually such persons were previously registered in the securities business but have been working for many years in securities-related fields without association with a broker-dealer. In many cases, these individuals are coming to a member firm in a management capacity. It is common for the NASD in such circumstances to waive the representative examination and require a principal examination. In cases where an individual with significant securities-related experience joins a member as a representative, the NASD may waive the representative examination but require the person to attend a continuing education session before the registration becomes effective. [/] Symon's situation does not fall under any of the circumstances in which the NASD normally considers granting unconditional waivers. He is neither a Chartered Financial Analyst, nor an individual returning to the private sector after years of public service to the securities industry. Symon further would not be aided by a conditional waiver. He is attempting to become associated with his company Braveheart in a management capacity. While he might be eligible for a conditional waiver that would exempt him from the requirement that he take the representative examination, he is not seeking such relief. Under the NASD's practice, he would still be required to take the principal examinations for which he seeks a waiver. [/] V. For the reasons discussed above, we find that the NASD's registration and waiver rules are and were applied by the NASD in a manner consistent with the purposes of the Act. We also do not believe that, by requiring Symon to comply with the examination requirements, the NASD has subjected him to an unfair competitive advantage. All other similarly situated applicants are required to take the applicable examinations before being issued licenses. [/] We note also that the NASD has substantially revised the majority of its rules. We believe that requiring **FOOTNOTES** [/]:/Rule 1021(c) provides that: [a]ny person whose . . . most recent registration as a principal has been terminated for a period of two or more years immediately preceding the date of receipt by the Association of a new application shall be required to pass [the applicable] Qualification Examination . . . . NASD Membership and Registration Rule 1021(c). [/]:/NASD Membership and Registration Rule 1070(e) states that: the Association may, in exceptional cases and where good cause is shown, waive the applicable Qualification Examination and accept other standards as evidence of an applicant’s qualifications for registration. [/]:/NASD Regulation staff inadvertently dated its decision May 29, 1997, well before Symon’s request. After Symon brought the error to the staff’s attention, the staff reissued its decision with the correct date, October 21, 1997. We conclude Symon was not prejudiced by this error. [/]:/Symon also attempted to rebut the NASD Regulation staff’s assertion that he had not functioned as a principal since 1994 by asserting that he continued to operate as a FINOP and a Principal for Great Midwest Securities Corporation ("Great Midwest") until March 14, 1995. NASD Regulation staff determined that Symon’s registration as a principal and FINOP at Great Midwest was never "completed." Symon does not claim on appeal that he had effective registrations at Great Midwest. Even if those registrations had been effective, they lapsed more than two years before his application to become Braveheart’s principal and FINOP. [/]:/15 U.S.C. § 78a et seq. (1997). [/]:/15 U.S.C. § 78s(d)(1)(1997). [/]:/Frank R. Rubba, Securities Exchange Act Rel. No. 34-40238, 67 SEC Docket 1775, 1777 (July 21, 1998). [/]:/67 SEC Docket at 1777, citing Exchange Services, Inc., 48 S.E.C. 210, 214 (1985). In Exchange Services, Inc., we concluded that the NASD’s denial of applicant’s request for examination waivers on behalf of its order takers constituted an effective bar from associating with a member. [/]:/See 15 U.S.C. § 78s(d)(1)(1997). [/]:/We take no position on whether, as a general question, the determinations of self-regulatory organizations relating to requests for a waiver or an exemption from an NASD rule are reviewable. [/]:/15 U.S.C. § 78s(f)(1997). [/]:/See Memorandum dated April 10, 1997 from Frank J. McAuliffe, vice-president of NASD Regulation, Inc., to Debra Bollinger, Chairperson of North American Securities Administrators Association. The standards for such waivers are discussed above. [/]:/See id. [/]:/Id. [/]:/Id. [/]:/Id. [/]:/Id. [/]:/Id. [/]:/See Exchange Services, Inc., 48 S.E.C. at 214. Symon to take an examination on these new rules is fully consistent with the purposes of the Act and will ensure that he maintains the requisite levels of knowledge and competence. Accordingly, on the basis of the foregoing, we shall dismiss this appeal. An appropriate order will issue. [/] By the Commission Jonathan G. Katz Secretary **FOOTNOTES** [/]:/All of the contentions advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed herein. UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. 41285 \ April 14, 1999 Admin. Proc. File No. 3-9609 __________________________________________________ : In the Matter of the Application of : : JON G. SYMON : J.G. SYMON & COMPANIES : 101 West 11th Street, Suite 1200 : Kansas City, Missouri 64105 : : For Review of Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. : __________________________________________________: ORDER DISMISSING APPLICATION FOR REVIEW OF DENIAL OF WAIVER OF EXAMINATION BY REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that Jon G. Symon's petition for review of the denial by the National Association of Securities Dealers, Inc. of a waiver of the requirement that Symon of take the Series 24 and 27 registration examinations be, and it hereby is, dismissed. By the Commission. Jonathan G. Katz Secretary